Regulation

FTC On NetSpend: Company Hit Consumers With Misleading Claims For Prepaid Cards

prepaid card

The Federal Trade Commission said on Thursday (Nov. 10) that NetSpend Corp. has been misleading to consumers of its prepaid cards, with promises that they would have immediate access to funds, with “no holds and no waiting.”

But yet, the FTC alleges in a complaint filed in Atlanta that the firm actually conducted business practices that “rendered those claims deceptive.”

In fact, said the firm, customers were beset by delays in accessing funds tied to their cards, at both the activation process and even afterward. The verification proved especially onerous, and the funds loaded onto cards were rendered inaccessible.

The complaint alleged that hardships ensued to the point of evictions, vehicle repossessions and the like. Even once those consumers had asked for refunds, the waits continued — sometimes for weeks. At the same time, NetSpend levied fees that helped drain funds even further.

In response to the FTC actions, NetSpend said in a statement that it “intends to vigorously contest this complaint and has substantial defenses to do so.”

“At issue in the complaint is whether consumers were deceived because of NetSpend’s compliance with federally mandated obligations under the USA PATRIOT Act to confirm the identity of those acquiring NetSpend prepaid cards. NetSpend takes seriously and carefully adheres to these legal mandates to fight identity theft, money laundering and terrorist financing and believes that no one was deceived or harmed by the company’s compliance with these legal obligations.”

The company went on to say in its statement that “the complaint also relates to NetSpend’s fraud controls, which are required by federal law, including the FTC’s own Red Flags Rule, to monitor accounts for account takeover and possible fraud in order to protect consumer funds. These processes are not deceptive, but instead comply with the law and protect consumers.”

 

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